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SERC/Urban and Spatial Programme Discussion Paper
Housing Allowance and Rents: Evidence from a Stepwise Subsidy Scheme
Essi Eerola and Teemu Lyytikäinen
August 2017
Paper No' SERCDP0220:
Full Paper (pdf)

JEL Classification: H22

Tags: housing demand subsidies; housing allowance; incidence; rents

This paper studies the effect of housing demand subsidies on rents using discontinuities in the Finnish housing allowance system as a quasi-experimental setting. The stepwise dependence of housing allowance on the floor area of the dwelling and the year of construction of the building causes economically and statistically significant discontinuities in the amount of housing allowances. However, our results show that there are no discontinuities in rents of the recipient households at these cut-offs. Instead, differences in the amount of the housing allowance are translated roughly one-to-one into differences in the rent net of housing allowance.